Kevin Spacey and Molly Parker in “House of Cards,” a Netflix hit in its second season.

By Edward Wyatt and Noam Cohen
New York Times
February 24, 2014

NEW YORK — Comcast, the largest US cable and broadband provider, and Netflix, the giant television and movie streaming service, said Sunday that Netflix will pay Comcast for faster and more reliable access to Comcast subscribers.

The deal is a milestone in the history of the Internet. Content providers like Netflix generally have not had to pay for access to the customers of a broadband provider.

But the growing power of broadband companies like Comcast, Verizon, and AT&T has given them increased leverage over sites whose traffic gobbles up chunks of a network’s capacity. Netflix accounts for nearly 30 percent of all Internet traffic at peak hours.

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The agreement comes 10 days after Comcast agreed to buy Time Warner Cable for $45 billion, which would make Comcast the cable provider to nearly one-third of US homes and the high-speed Internet company for close to 40 percent. Federal regulators are expected to scrutinize whether that deal would thwart competition.

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It is also unclear whether the Comcast-Netflix deal violates the principles of what is known as Net neutrality — when all content providers have equal and free access to consumers. People close to the deal characterize it as a common arrangement. Content companies frequently pay a middleman to carry traffic to a broadband provider, which then moves through its pipes and into a consumer’s home.

The companies said “Netflix receives no preferential network treatment under the multiyear agreement.” Details were not disclosed, but a person close to the companies said it involved annual payments of several million dollars.

Others, including Tim Wu, a Columbia Law School professor and advocate for Net neutrality, said the deal was one of the first such in which a broadband provider like Comcast has extracted payment to send specific content through the “on ramp” to its network. “I think it is going to be bad for consumers,” he added, because such costs are often passed through to the customer.

In recent months, Netflix had reported that delivery speed of its content to Comcast subscribers had declined by more than 25 percentl. Customers of other providers, including Verizon, also reported delays. Comcast, Verizon, and other Internet providers denied playing any role in slowing traffic. They blamed the intermediaries that Netflix used to deliver its content to Comcast and said those middlemen — companies like Cogent Communications — were trying to shove too much data through too small a pipe.

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The contours of a deal were reached after Brian Roberts, chief executive of Comcast, and Reed Hastings, CEO of Netflix, met last month, sources close to the deal said. The arrangement will deliver an “even better user experience to consumers, while also allowing for future growth in Netflix traffic,” the companies said Sunday. Netflix will now deliver its content directly to Comcast rather than going through an intermediary.

Netflix will now essentially have its own on-ramp to Comcast customers. That is different from paying to be moved through the pipes more quickly, a deal known as “paid prioritization” that is generally seen as a Net-neutrality violation.